JPMorgan Chase & Co., GE, Sears Holdings and Nationwide are among the big brands that have recently initiated audits of their ad buyers, according to a report in The Wall Street Journal. While JPMorgan has gone so far as to freeze its annual $250 million ad buying account, other companies like Heineken, Allstate and Fidelity Investments are allegedly vying for stronger auditing rights and tighter contracts with agents.
The decision to audit their media buying partners comes out of marketers' concern over a lack of transparency in what they are paying for. In June, investigative consultants K2 Intelligence released a report on behalf of the Association of National Advertisers (ANA) uncovering a number of non-transparent practices running rampant within ad agencies. Items highlighted in the report included: cash rebates passed between media providers and agencies which clients were not party to and received no savings from; “fogginess” on prices agents spent on inventory; and conflicts of interest stemming from agents' investment choices.
- The wave of audits is the latest sign of how the transparency issue is putting a strain on industry relationships. Just last week, 4A’s announced a far more stringent approach to enforcing its Transparency Guiding Principles of Conduct (TGPC), threatening to expel non-compliant agencies.
Questions over ad agencies' readiness to execute transparent business practices have plunged them into hot water now that multiple major marketers are auditing their own buyers via outside counsel — an investigative endeavor that is shaping up to be one of the biggest in recent memory and potentially devastating from both a financial standpoint and to the future health of agency-client relations.
The K2 report stands as testament to just how unwieldy media buying has become in an increasingly fragmented media landscape for brands being marketed to by an increasingly insular agency world.
“The reality is that the holding companies are so large, interconnected and incestuous that it is very easy to have very little transparency in that world,” said Subway’s Chief Marketing Officer Joe Tripodi in a now strangely prescient interview conducted by the Journal last year.
Whether or not the ethical issues emphasized by K2 were intentionally carried out or not is unclear, but the fact that the report's findings became an immediate call to action for a significant swath of U.S. marketers to investigate suggests intentions may not matter, with potential remedies arriving as too little, too late.
4A’s recent promise to crackdown on shady transparency practices read as a reactive measure rather than a proactive consideration, trying to close the floodgates opened by the ANA report when a strong policy should have already been enforced. And the urgency with which brands like Heineken and Allstate are pursuing more flexible auditing power shows client trust already thinning.
If the alleged unethical practices suggested by the ANA report are verified as widespread by audits, the road to mending those relations would become far rockier, even potentially irreparable.